Daybreak - Coaching giant Allen Career Institute's Kota stronghold may soon become history

Episode Date: August 11, 2024

Every year, nearly three lakh students flock to the city of Kota in Rajasthan, the coaching capital of the country. Almost half of them enroll themselves at Allen Career Institute, a 36 year-old pioneering coaching centre that was last valued at over 1 billion dollars.Lately, Kota’s reputation has been under question because of the frequent student suicides.This has obviously affected the number of students coming in and for the first time in its history, the coaching giant Allen is seeing a fall in its admissions. And its no small dip. Admissions have dropped by over 35% to around 80,000. But here’s the interesting part. This isn't restricted to Allen institute in kota alone. Its happening in other cities too.Actually two years ago, VCl investment firm Bodhi Tree Systems came into the picture and Allen began expanding the number of campuses outside Kota. Now, in total, there are over 200 of them and at least, one-third are new. The company’s CEO Nitin Kukreja told The Ken that Allen entered 16 new cities like Patna and Lucknow last year alone. A senior teacher at Allen Kota told us that for a centre to be profitable, it needs at least 4,000–5,000 student enrolments. But right now, Allen is not even seeing half of this. At least half a dozen senior Allen staffers and competitors told The Ken that a big chunk of these new centers are losing money. Staff pays have taken a hit but Allen is also hiring staff in new cities with a possible plan of shifting base out of Kota.In today’s episode we take a look at what’s happening inside one of the country’s latest test prep giants.Tune into to Two by Two's latest episode, 'Delhi pricked the Bengaluru bubble' here

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Every year, nearly 3,000 students flock to the city of Kota in Rajasthan, or as many like to call it, the coaching capital of the country.

And almost half of them, around a lack and a half roughly, go and enroll themselves at one particular institution, Alan Carrillo Institute, which was last valued at over $1 billion. It is a pioneering institution that has been around for the last 35 years. Now, as we all know, Cotard's reputation lately has been under question because of the frequent student suicides. This has obviously affected the number of students coming in, and for the first time in its history, the coaching giant Alan is seeing a fall in its admissions. And it is no small dip. Admissions have dropped by over 35% to around 80,000. But here's the interesting part. This isn't restricted to Allen's institute in quota alone. It's happening in other cities as well.

Actually, two years ago, VC investment firm Bodhi Tree Systems came into the picture and Alan began expanding the number of campuses outside of quota. Now, in total, there are over 200 of them and at least one herd of them are new. The company CEO Nitin Kukreja told my colleague Alifia Khan that Alan entered 16 new cities like Patna and Lachno last year alone. A senior teacher at Alan Kota told us that for a centre to be profitable, it needs at least 4 to 5,000 student enrollments. But right now, Alan is not even seeing half of this.

So it is not surprising that at least half a dozen senior Allen staffers and competitors told again that a big chunk of these new Allen centers are losing money. Staff pays have also taken a hit, but Allen seems to be hiring staff in new cities irrespective with a possible plan of shifting base outside of Kota. In today's episode, we take a look at what is happening inside one of the country's largest test prep giants. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickaar Sharma, and I Don't Chase the News Cycle. Instead, every day of the week, my colleague Rahil Filippoz and I will come to you with the one business story that is worth understanding and worth your time. Today is Monday, the 12th of August.

Pauline Admissions has forced Allen Institute to do something it's never done before in its three-decade-long existence. Allen was known for giving its teachers what a senior teacher called legendary salaries. In fact, it used to poach the best talent from other institutes. Now, Allen is restructuring employee salaries and has reduced their pay by at least one-fifth. What is most interesting to note here is that all of this started after VC firm Bodhi Tree entered the scene. It bought a third of Allen Careo Institute for $600 million. And after that, it is the VC firm's executives that run Allen's day-to-day operations.

The four Maheshwari brothers are now a part of the company's board. Earlier last month, the institute's founder-director Rajeshwari told its 4,000-strong workforce that the tough period would last a couple of years. But you know what else, he said? Talking about their high salaries in the past, he said Alan's teachers so far had been the recipients of a lottery. To give you a better idea, mid-level teachers were making anywhere between 20 to 40 lakh rupees per annum and the institute star teachers were getting even more. After the pay cut decision, over 600 teachers wrote to Maheshwari and demanded that the management

reviewed the decision. But Kukreja, the CEO, sees them as a small section of employees. He told us that transformations like this take time and they will face some resistance. as well. He also told us that there is a disproportionate attention being given to quota. He agreed that the centre remains Alan's biggest contributor to admissions, bringing in at least a quarter of them, but he said 75% enrollments now come from other centres. And that is actually the pain point as well. Not only is Alan losing revenue inside of quota, it is also doing the same in its newly opened offline centers. A senior teacher told the Ken that in Delhi alone it has more than a dozen centres and they rang up a loss of 70 crore rupees in two years. When we asked Kukreja about this,

he refused to get into numbers. He said in any business the first couple of years is all about building it. He said what you see as a loss Alan sees as an investment and as building for the future. Two people aware of the company's funding details told us that Alan is reported to have spent equal amounts of money to both expand outside of quota and also to boost its online vertical. Cukreja says that because of this option, they haven't really lost out on enrolments. But sources told us that the online business is not really that stable either. Stay tuned for more on this.

Bangal. The city of great weather, great dosas, VC money and great tech talent. Look, I've studied, worked and lived in Bangalore. for a long time, so this might sound a little biased. But this has been the Bangalore narrative for the longest time. Want to build a startup? Bangalore. The Silicon Valley of India is the place for you.

But here's the thing. This narrative has now slowly become a bubble. The Bangalow bubble. Even though more and more startups here believe they're doing great work, if you zoom out a little, and look at the list of most startups that have gone public, for instance. These are companies like Zomato, PayTM, Make My Trip, Info Edge, they all have one thing in common. They're all built out of Delhi.

It seems like Bangalore wants to build startups, but Delhi wants to build businesses. And at a time when funding, investors, customers are all limited. And Bangalore companies like Swiggy, Olale Electric and Flipkart are set to go public, this isn't just anecdotes or theories. it's a competition. Where you build will determine your future. And it seems like only one of these cities will eventually win. This is the tug of war that I, Praveen Gopal Prishan and my co-host, Rohend Darmakumar,

talk about in the latest episode of 2x2, a weekly premium business podcast from the Ken's newsroom. If you're a premium subscriber of the Ken, you can listen to the full episode on our app. But if not, no worries. We have a free version of this episode wherever you get your podcast. Thank you and back to your show now. Alan's online story began back in 2022. A fierce battle had played out between Alan and Unacademy

when Anacademy came into quota with its offline centres and reportedly spent 100 crore rupees to poach teachers from Alan. Though it did not create a dent in Alan's business, it did push the coaching giant's ambitions to face off with the ed techs in their own turf, which was online. Allen had made its intentions clear, aiming for 100 times growth in enrollments. It wants to take its student count to 25 million in five years. And besides the move to expand physically to more cities,

its digital business remains central to this plan. But the Ken spoke to at least two senior staffers at Allen and two founders of coaching institutes, and they told us, even across all courses, Allen's enrollment in online courses has not crossed the 15,000 to 20,000 mark. Physics Walla, on the other hand, had about 2.4 million paid orders in 2023 for its 28 online test prep segments. Meanwhile, Allen Digital only offers medical, engineering test prep and foundation courses for school students. Coaching experts believe that the key difference is in the fee. While Physics Walla charges a student anywhere in the range of $4,000 to $6,000 to $6,000 for admissions to its prep course for NEAT 20-2025,

Allen charges at least 20 times more. Getting students to commit a fee for an online course, keeping with what one pays for an offline center, is very difficult, especially in the post-COVID world. On asking Kukreja about this, he gave us the example of Zomato. He said, and I'm quoting, did Zomato put? post losses or make investments for so many years. End quote. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-com feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv See.